FX.co ★ India 10Y Yield Steadies Ahead of Debt Sale

The yield on India’s 10-year government security hovered around 6.7%, halting its recent slide after touching a near four-month low, as investors awaited the auction of INR 213.5 billion in state bonds for fresh cues. The benchmark yield has fallen roughly 37 basis points over the past six weeks, supported by steady foreign inflows, reduced monsoon-related inflation risks, and lower crude oil prices following a 21% decline in Brent crude during June. Overseas investors have purchased more than INR 351 billion of government bonds over the last month, encouraged by foreign investment facilitation measures and expectations of India’s inclusion in Bloomberg’s Global Aggregate Index. At the same time, an improvement in monsoon conditions has narrowed the cumulative rainfall deficit to 24% as of July 5, from 43.1% a week earlier, easing inflation worries. However, a modest uptick in the US 10-year Treasury yield to around 4.50%, ahead of the release of the Federal Reserve’s June meeting minutes, capped further declines in Indian bond yields.